Highlights of Orr interview

May 15, 2013

Orr said the Detroit Water and Sewerage Department, the maintenance of Belle Isle and the city's power grid cost the city about $85 million a year. He would look at how the city could create savings by taking some of those costs off the books. / 2006 photo by ERIC SEALS/Detroit Free Press

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Free Press Staff

Detroit Emergency Manager Kevyn Orr answered some pressing questions about the city’s recovery in an hour-long interview Monday with Free Press reporters and editors. Here are some highlights of the discussion:

On the probability of bankruptcy:

Orr said there’s a good chance the city will not file for bankruptcy. He divided the city’s financial issues into five categories — long-term liabilities, operating deficits, unfunded actuarial liabilities such as legacy costs, debt service and labor issues — and said stakeholders from each group will have to accept concessions to avoid bankruptcy. Orr said the likelihood of reaching those concessions is better now than it was the day before because his report gives an honest, comprehensive look at the city’s finances.

On negotiating with creditors:

There have been some preliminary discussions already, Orr said, and more discussions will happen in the next couple weeks. Orr said he is still preparing data to explain to the city’s creditors how potential debt settlements would work.

On his timetable:

Orr’s work over the next four to six weeks will reveal the potential for an out-of-court resolution to the city’s financial crisis, he said. “What we can’t do, and what we won’t do, is be slow-walked throughout the summer when there’s no progress just for delay. We’re not unaware that for a long time some of the interested parties in the city have basically (said) ‘we’ll wait them out, we can last them out.’ We’re not going to engage in that.”

On whether Detroit’s pension systems are properly valued:

While his report to the state warned that the funds are underfunded by at least $600 million, Orr said he is still assessing the funds’ value. He recently sent the funds’ managers a request for information for his analysis, he said.

On whether pension benefits are in jeopardy:

“Right now, sitting here today, I would tell current pensioners that for the near-term future it is status quo. Part of our analysis as to what’s going to be in jeopardy, if anything, will depend upon an assessment that we get as to the valuations that are currently being done.”

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On selling the city’s assets:

Orr said he is careful with the concept of selling, but admitted he has to seriously consider selling or leasing city assets because of the potential savings and revenues. He said the Detroit Water and Sewerage Department, the maintenance of Belle Isle and the city’s power grid cost the city about $85 million a year, and that he would look at how the city could create savings by taking some of those costs off the books. “When I go out, I hear a lot of possessive pronouns, you know, ‘Don’t sell our; don’t sell mine; our water department’s one of the great jewels.’ You’re right, it is. But 80% of the revenue comes from the suburbs. You wouldn’t have a water department without your suburban customers.”

On the quality of the city’s workforce:

“I think there is talent in the city and in our civil service. My experience has been, particularly with police and fire, most people want to do their job. They want to be good at it.” The city needs to focus on proper training and establish a rewards system to maximize its workers’ potential, he said.

On the search for a new police chief:

Despite grumblings from the mayor’s office about Orr’s role in picking the next chief, Orr said he has an obligation to make the pick because public safety accounts for such a large portion of the city’s budget. He said the department, which has had five chiefs in the last five years, needs stable leadership. Orr said the next chief’s contract could include provisions to ensure stability after Orr’s job as emergency manager ends. Orr said a new chief will be hired “imminently.”

On the likelihood that Cincinnati Police Chief James Craig will become the next chief in Detroit:

“Chief Craig in Cincinnati has been in L.A., which by any stretch of the imagination is a different order of magnitude than Detroit, with significantly different problems ... it’s a border community, it’s a boom-and-bust state.” Anyone who questions Craig’s qualifications to run the Detroit Police Department would have to consider his work experience, Orr said.

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On comparing the Detroit EM job with his experience with Chrysler’s bankruptcy:

“I don’t think it’s analogous at at all. Private-sector bankruptcies, you’re trying to restructure a balance sheet, pay off creditors, deal with the supply chain, deal with your labor force, deal with OPEB (other post-employment benefits), so the topics are very similar, but your end goal is to build a better company so it can go forward and become more profitable and return to shareholders. Your major concern is your return to both your creditors but eventually to your business. Chapter 9 (municipal bankruptcy), by definition, philosophically, theoretically and ideologically is just different. Your major concern is to provide services and benefits for the citizens ... you’re not dealing with a profit business.”

On what he thinks of Detroit:

“I like Detroit’s grittiness and toughness and willingness to fight. I just want Detroit to fight the right fights. There’s a lot of fight in Detroit, some of it not so productive. And to what end? What are you fighting over? What’s your goal? What’s your end game? If you’re going to fight, let’s fight together. Let’s fight crime. Let’s fight apathy. Let’s fight a lack of drive.”